Surveyors confirm fall in house prices but worst is still to come

13 May 2008 / by Rebecca Sargent

A record number of surveyors reported a fall in house prices and market activity last month, according to the latest UK housing market survey, published today by the Royal Institute of Chartered Surveyors (RICS).

The survey showed that according to 95.1 per cent of RICS members house prices fell in April, an increase from 79.4 per cent in March. The figures confirm that housing market activity is in decline, which, to some extent has cushioned the fall for house prices so far.

In its statement RICS commented that "a lack of new instructions to sell property continues to provide a crutch for the market." According to the study, the worst is still to come because as yet the recently reported increase in repossessions has not filtered onto the market through distress sales.

As the housing market stands, the lack of supply and strong employment figures are keeping larger price declines at bay. However, if recent reports are to be believed, repossessions could soon have a detrimental impact on the housing market.

As mortgage rates rise and lending criteria tightens, RICS' latest survey reflects the general mood in the housing market: 68 per cent of surveyors questioned reported a fall in the number of new buyer enquiries.

According to RICS, this decline is a direct result of the credit crisis as banks fail to pass on official interest rate cuts and lenders change the availability and accessibility of their mortgage products. And as supply declines, so too does the number of completed transactions; the figures show that the ratio of completed sales compared to the stock of unsold property fell to 21.1 per cent.

RICS spokesperson, Ian Perry said: "Although most surveyors are now seeing price declines, the extent of the fall is, at this stage, quite modest. The real issue is the collapse in the number of housing transactions. This has very real implications, not just for the property industry but also the high street and wider economy."

Commenting on the survey, Peter Bolton King, chief executive at the National Association of Estate Agents (NAEA) said: "The report reflects our own take on the market. The house price falls that are taking place are modest and the picture is still patchy.

"There is no denying that the credit crunch has affected confidence in the market – especially first time buyers who are finding it hard to find financing to get on the ladder – but it is important to remember that the underlying factors that support the property market remain: low unemployment, historically low interest rates and a pent-up demand for houses."